Tracy L. Rich

Executive Vice President &

General Counsel 

1

July 21, 2015

Submitted electronically

e-ORI@dol.gov

e-OED@dol.gov

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflict of Interest Rule, Room N–5655

U.S. Department of Labor

200 Constitution Avenue NW

Washington, DC 20210

Office of Exemption Determinations

Employee Benefits Security Administration

(Attention: D–11712)

U.S. Department of Labor

200 Constitution Avenue NW, Suite 400

Washington, DC 20210

Re: Definition of the Term Fiduciary (RIN 1210-AB32)

Best Interest Contract Exemption (ZRIN 1210-ZA25)

Amendment of PTE 84-24 (ZRIN 1210-ZA25)

Ladies and Gentlemen:

On behalf of The Guardian Life Insurance Company of America (“Guardian”) and 

its affiliates, we are pleased to submit this comment letter regarding the Department of 

Labor’s proposed changes to the definition of “fiduciary” under the Employee Retirement 

Income Security Act, as amended (“ERISA”) and the Internal Revenue Code of 1986, as 

amended (the “Code”), the proposed introduction of two new exemptions, including the 

best interest contract exemption, and the proposed changes to class exemptions on which 

Guardian and other insurance companies rely (the “Proposal”). 

We understand the efforts of the Department of Labor (the “Department”) in 

seeking to protect the interest of retirement savers. Guardian generally supports the 

concept of a best interest standard for individuals and their affiliated entities who act as 

investment advice fiduciaries to ERISA plans, plan participants and IRA owners. 

However, we believe that the Proposal as drafted has numerous unintended consequences 

that would significantly limit the availability of retirement information and products that 

provide guaranteed lifetime income options to Americans who are seeking to plan for 

retirement. 
2

America is in the midst of a retirement crisis. The United States Social Security 

Administration and the Pew Research Center reported in 2010 and 2011 that until about 

the year 2030, 10,000 additional people will reach retirement age every day. By 2030, 

projections are that 80 million people, or roughly 18 percent of the total projected US 

population, will be living in retirement. 1 While Americans are living longer than ever 

before, the National Institute on Retirement Security reported in 2013 that “60 percent of 

working households approaching retirement have less than their annual income saved in 

retirement accounts.”2

Americans today need more information and opportunities to save for retirement, 

not less. Public policy makers should be making it easier, not harder, for small businesses 

to provide retirement options to employees. In this letter, we discuss the changes we 

believe need to be made in order to appropriately balance the Department’s intent of 

protecting retirement savers while ensuring that American workers can still choose the 

retirement products that they want, that are appropriate to their circumstances, and that are 

from financially strong institutions.

In particular, Guardian urges the Department to focus on the following areas

when considering comments on how to improve the Proposal:

 Recognize the importance of annuity products, which are only issued by 

insurance companies, in providing the security of lifetime income for 

consumers saving for retirement by removing the bias in the Proposal 

against the sale of these products.

 Protect the ability of middle income and working class consumers saving 

for retirement to choose among a variety of products and services to help 

fund their retirement by removing the emphasis on low-cost alternatives in 

the Proposal that generally do not provide financial guarantees.

 Modify the definition of “investment advice” to exclude, among other

things, pure selling activities.

 Expressly exclude the sale of insurance products to health and welfare 

plans from the Proposal.

 Remove the elements of the Proposal that would jeopardize the sale of 

proprietary products by proprietary distribution channels.

Without the modifications that are discussed in this letter, the Proposal will result 

in unnecessary disruption in this marketplace and, more importantly, negative impacts to 

 

1 Social Security Annual Performance Plan for FY 2012 and Revised Final Performance Plan for FY 2011; 

Baby Boomers Approach 65- Glumly, Pew Research Center, Social and Demographic Trends, December 

2010.

2 The Retirement Savings Crisis: Is It Worse Than We Think?, National Institute on Retirement Security, 

June 2013.
3

retirement plans, plan participants, and individual IRA investors. Specifically, without 

these changes, the Proposal will:

 Make it harder for retirees to obtain guaranteed lifetime income options

 Make it harder for small businesses to offer retirement plans to employees

 Make it harder for workers to obtain information and guidance on retirement 

products.

Based upon the foregoing, Guardian respectfully submits this comment letter, 

which is organized as follows. Part I provides a description of Guardian’s business with a 

focus on our customers, and the business lines serving these customers, that will be 

impacted by the Proposal. Part II summarizes Guardian’s primary concerns with the 

Proposal. Part III provides specific comments related to the concerns raised in Part II. 

Finally, Part IV discusses additional important issues with the Proposal that we believe 

should be addressed by the Department in the final regulation.

I. Overview of Guardian’s Business

Guardian is a highly rated mutual insurance company that has effectively served the 

small qualified plan and IRA markets. The Proposal as written negatively impacts the 

plans and IRA owners served by Guardian.

Guardian is a financially strong, highly rated mutual insurance company that has 

been in existence for over 150 years. Unlike a stock company, a mutual insurer is owned 

by its policyholders. This means that Guardian’s interests are aligned with the interests of 

its customers. Guardian’s focus is on building and maintaining a strong financial 

foundation that will serve its customers today and into the future. Guardian is one of the 

largest mutual life insurers in the United States with $6.8 billion in capital and $1.3 billion 

in operating income in 2014. Guardian has continuously received exemplary ratings from 

all four of the major credit rating agencies. We are very proud of the financial strength we 

have maintained throughout our 155-year history.

Guardian and its subsidiaries issue and distribute products that include life 

insurance, disability income insurance, annuities and investments for individuals and also 

include workplace benefits, such as group life, dental, vision and disability insurance as 

well as funding vehicles for employer-sponsored qualified retirement plans. Guardian has 

approximately 6,000 employees and a network of over 3,000 financial representatives in 

more than 70 agencies nationwide.

Guardian is a compliance-oriented organization subject to rigorous regulation and 

enforcement by state insurance regulators. Various entities in the Guardian organization, 

and products issued by these entities, are also subject to regulation and enforcement by the 

Securities and Exchange Commission (“SEC”), the Financial Industry Regulatory 

Authority (“FINRA”) and the Internal Revenue Service, as well as the Department.
4

In most instances, we believe that implementation of the Proposal will dramatically 

increase the costs and complexity of Guardian’s participation in the small qualified plan 

and individual retirement account (“IRA”) markets to the detriment of the very same plans, 

plan participants and IRA owners the Department is seeking to help with the Proposal, by 

making retirement product options less affordable to consumers. 

As you will see from the descriptions below, Guardian is an established provider 

of products and services to the ERISA plan and IRA markets. Guardian is commenting on 

the Proposal because it is concerned that, if the Proposal is adopted as written, a likely 

result is that its ERISA plan and IRA customers will have diminished access to the broad 

range of retirement products and services that companies like Guardian provide. We 

believe that Guardian and its subsidiaries have been able to establish meaningful positions 

in these markets because of a legacy of solid financial strength ratings that are taken into 

account by customers interested in purchasing guaranteed lifetime income products from 

companies that need to be financially sound decades in the future to fulfill their guarantees. 

At its core, Guardian is a customer-centered organization and strongly wishes to continue 

to serve the needs of its ERISA plan and IRA customers. We believe, however, that the 

substantial changes to the Proposal described in this comment letter are necessary in order 

to make this goal feasible.

Guardian specializes in providing a range of products and services for small 

businesses and their employees. Guardian’s retirement business serves the small qualified 

retirement plan and IRA markets. This market is currently underserved and many small 

employers have not established retirement plans for their employees. Those small 

employers who have established retirement plans frequently do not have access to the same 

products and services that larger employers do. Since the initiation of Guardian’s group 

variable business in the late 1980’s, over 95% of the sales of group variable funding 

vehicle products issued by Guardian have been made to qualified retirement plans with 

fewer than 100 participants. Thirty-seven percent of these sales were made to small 

businesses that previously offered no retirement plan to their employees. 

Guardian also issues individual variable and fixed annuities. In 2014, over 70% of 

individual annuity sales were made to IRA owners, many as rollovers from 401(k) plans. 

These individual products can provide a guaranteed lifetime income stream to plan 

participants who rollover some or all of their plan assets into an IRA. In most cases, 401(k) 

plan participants do not have access to guaranteed lifetime income through their plans. In 

fact, in a study conducted by LIMRA, less than one percent of defined contribution plans 

provide for lifetime income through annuitization of benefits within the plan.3 Therefore, 

to the extent that an annuity option is not available to an investor in his or her 401(k) plan, 

Guardian’s agents will help the investor identify an annuity that meets his or her needs and 

discuss, if needed, the option to rollover from the 401(k) plan to an IRA through which the 

annuity can be purchased. Thus, for many investors, the only option for a plan participant 

to obtain the benefit of guaranteed lifetime income is to enter into a rollover transaction. 

 

3 Quarterly Retirement Perspectives, LIMRA Secure Retirement Institute, Fourth Quarter 2013.
5

As discussed below, we believe that the Proposal will be highly disruptive to the 

types of discussions that lead to the formation of a 401(k) plan for a small business or 

effective retirement planning for individuals. We believe that this is an unintended 

consequence of the Proposal for plan sponsors, plan participants and IRA owners.

Another major business area for Guardian is a retail broker-dealer subsidiary that 

offers for sale proprietary and non-proprietary mutual funds, annuities and advisory 

programs. At year-end 2014, this subsidiary had over $12 billion in IRA assets under 

management, representing over 60% of the overall business on its books. The account value 

for 52% of these IRA accounts is $25,000 or less. Most of this business represents onetime commission sales made by registered representatives acting strictly as product sellers 

and not as investment advice fiduciaries. The payment of a commission for these types of 

sales is often more beneficial for an investor than the ongoing payment of an advisory fee. 

Under the Proposal, the selling agent would be considered an investment advice fiduciary 

in these situations. An unintended consequence of the Proposal is that the additional 

operational costs and unquantifiable risks associated with the Proposal will make it 

challenging and possibly unfeasible for our retail broker-dealer and its registered 

representatives to continue to effectively serve the small IRA market. We are concerned 

that Guardian may be forced to choose to discontinue selling products to small IRA 

accounts due to the new regulatory costs, administrative burdens and legal risks generated 

by the Proposal.

Guardian agents typically interact with prospective clients through the use of a 

proprietary data aggregation tool. The tool helps the agent and prospective client gather 

thorough information about a prospective client’s assets and liabilities so that together they 

can evaluate possible product solutions and financial decisions. Because the information 

gathered may include information concerning qualified plan and IRA assets, and because 

certain generic discussions involved in the process may be interpreted as recommendations 

under the Proposal, the consequence is that all agents using the tool may be considered to 

be investment advice fiduciaries even before this prospective client becomes a client. An

unintended consequence of the Proposal is that individuals will lose access to the use of 

this beneficial tool.

Guardian also maintains award winning call centers to help its clients.4 Our call 

center representatives provide information to plan participants about their plans, including 

their distribution options, and provide information about group and individual annuities 

they have purchased previously. Our call center representatives undergo a great deal of 

education and training so that they can quickly and accurately answer customer questions. 

Guardian is particularly proud of its call center representatives and the services they 

provide. However, we are concerned that, under the Proposal, our representatives will be 

unable to give participants and contractowners information they need about their plans and 

contracts without the imposition of fiduciary status and that, as a result, our call center 

 

4

In 2015, The Guardian Retirement SolutionsTM Group 401(k) and Individual Annuity call centers were 

recognized for the fifth consecutive year for providing “An Outstanding Customer Service Experience” for 

the live phone channel. For J.D. Power 2015 Contact Center Certification Program information, visit 

www. jdpower.com.
6

servicing will be curtailed significantly and our clients will not receive the information they

need to make informed decisions about their retirement.

Another important business area for Guardian involves the sale of group dental, 

vision, disability and life products to ERISA health and welfare plans sponsored by small 

business clients. In 2014, Guardian sold approximately 240,000 products to over 90,000 

welfare plans. The average plan size was 53 employees. Absent clarification or revision, 

the Proposal would impose investment advice fiduciary status on sellers of products 

intended to satisfy the employee benefit needs of small businesses. This may, in turn, 

threaten small businesses’ access to products that provide these welfare benefits to their 

employees. Insurance products purchased to provide welfare benefits are outside the scope 

of the Proposal and should be specifically excluded.

II. Guardian’s Primary Concerns with the Proposal

A. We support the Department’s recognition of the need to change the focus of 

retirement investors from products that emphasize a lump sum accumulation amount 

to solutions that create a lifetime stream of income during retirement. We believe the 

Proposal will hinder this change of focus to the detriment of middle and lower 

income American workers who are saving for their retirement. 

The Department has recognized the importance of lifetime income to American 

workers, particularly as they move from a defined benefit pension system where 

retirees are offered guaranteed lifetime benefits to a retirement system where they are 

responsible for managing their own retirement through savings vehicles such as defined 

contribution plans and IRAs. In fact, a Department news release states “As Americans 

live longer and pensions increasingly trend away from the traditional defined-benefit 

structure that provides a stream of guaranteed income for the duration of a retiree's life, 

improving access to lifetime income options is an important way to help retirees 

manage their savings.”

5 Similarly, the Department recognized the importance of 

lifetime income in the preamble to the Proposal, “Based on public input received in 

connection with its joint examination of lifetime income issues with the Department of 

the Treasury, the Department is persuaded that additional guidance may help improve 

retirement security by facilitating the provision of information and education relating 

to retirement needs that extend beyond a participant’s or beneficiary’s date of 

retirement.”6

Notwithstanding the Department’s support of lifetime income solutions, Guardian 

believes that the Proposal will have a negative impact on the sale of products that can 

meet the demand for lifetime income by consumers who are worried about outliving 

their retirement nest eggs. Other than defined benefit plans and Social Security, only 

one product in the retirement plan market meets the need for lifetime income: an 

annuity contract. Only insurance companies can issue annuities. Guardian currently 

issues individual and group variable annuities as well as fixed annuities. In addition to 

 

5 News Release, EBSA, US Labor, Treasury Departments act to enhance retirement security for an America 

built to last (Feb. 2, 2012), available at http://www.dol.gov/opa/media/press/ebsa/EBSA20111653.htm.

6 80 FR at 21944.
7

providing annuitization options under these contracts, a popular feature of many of 

Guardian’s individual variable annuities is a guaranteed lifetime withdrawal benefit. 

Under this guaranteed benefit, the annuitant will receive a guaranteed withdrawal 

amount, commencing on a date certain, for his or her lifetime. Guardian’s guaranteed 

lifetime withdrawal benefit also provides a guarantee that the withdrawal balance under 

the contract will not vary based on market performance. Thus, the investment risk is 

shifted from the individual retirement investor to Guardian.

Of course, because of the presence of these guarantees, variable annuity contracts are 

more expensive than a passively managed index mutual fund. Guardian is subject to 

substantial capital and reserve requirements under the New York Insurance Code and 

is closely regulated by the New York Department of Financial Services. The issuance 

and distribution of annuity products is broadly regulated by all fifty states and the 

District of Columbia as well as the SEC and FINRA. Guardian is also subject to 

mortality risk and has developed a sophisticated hedging program to deal with the risk 

it bears for providing guaranteed benefits, despite market volatility and a low interest 

rate environment. Providing benefits to contract owners despite the risks highlighted 

above requires Guardian to constantly assess those risks and the other responsibilities 

it is shouldering so that the company remains financially strong and capable of meeting 

its obligations to all of its policyholders. Part of assessing these risks is making 

actuarial calculations on how to price its products fairly and reasonably in light of the 

risks and obligations inherent in those products.

Unfortunately, Guardian believes that the Proposal will ultimately limit the availability 

of guaranteed lifetime income to American workers. This is the case because the 

Proposal makes the sale of products that offer guaranteed lifetime income extremely 

difficult. In particular, an overly broad definition of “investment advice” and a lack of 

adequate carve-outs, an overemphasis on cost, an apparent bias against the 

recommendation of proprietary products, a lack of clarity with respect to the application 

of the new and revised Prohibited Transaction Exemptions (“PTEs”) and overly 

burdensome disclosure requirements in the Proposal will impede the provision of 

guaranteed lifetime income products to American workers by Guardian and its industry 

peers. 

B. Without the significant revisions, the increased contractual, legal and disclosure 

requirements of the Proposal pose a significant challenge to serving working class 

and middle class retirement investors as well as small businesses. 

Almost all sales activity involving an ERISA-governed plan or IRA (including the use 

of Guardian’s data aggregation tool that helps gather information about a prospective 

client’s assets and liabilities) would be considered “investment advice” under the 

Proposal. This will be the result even in situations where the plan fiduciary understands 

that the selling agent is merely acting as a product seller and the plan fiduciary has no 

reasonable basis for believing that the seller is acting pursuant to a fiduciary standard. 

Further, the “carve-outs,” as proposed, fail to capture many of the activities related to 

the sale of products and services to small participant-directed plans and IRAs even 

though a plan fiduciary should have no basis for believing that a Guardian 
8

representative is acting pursuant to a fiduciary standard. The proposed PTEs add 

onerous conditions that we believe do not directly serve the needs of plan sponsors, 

plan participants and IRA owners while increasing operational costs that will be passed 

on to customers. The PTEs also introduce ambiguous terms that will create compliance 

uncertainty and increase litigation risks for entities seeking to offer products to plans, 

participants and IRA owners. We believe an unintended consequence of the Proposal

is that Guardian and its agents will face daunting challenges in their efforts to continue 

to provide products and services to small participant-directed plans and IRAs, 

particularly more complicated and higher cost products like some types of annuities. 

In addition, the carve-outs, as well as the additional compliance and legal burdens 

associated with the Best Interest Contract (“BIC”) Exemption and the revised PTEs,

will result in a competitive disadvantage for financial institutions seeking to serve the 

small-plan market and low and middle-income individuals.

In the absence of significant changes, the BIC Exemption as written will significantly 

increase the compliance and litigation costs underlying the delivery of products and 

services to Retirement Investors.7 Guardian believes that the Department can attain its 

stated goal of protecting Retirement Investors without requiring Guardian and its 

industry peers to comply with an unnecessarily multi-layered and complex compliance 

regime.

C. The Proposal creates barriers to Guardian selling its proprietary products. These 

barriers should be removed from the Proposal so that small qualified plans and IRA 

owners can continue to benefit from the security provided by Guardian’s retirement

products and services.

The proposed Best Interest Standard under the BIC Exemption and the proposed PTE 

84-24 will make it difficult for Guardian and its advisers to sell its proprietary products 

to plans and IRAs.8 We believe that Guardian’s small plan and IRA customers have 

been well-served by Guardian’s proprietary field force. Through a rigorous agent 

training program, a team of wholesalers who are dedicated primarily to servicing the 

Guardian field force and access to senior product and operations management, 

Guardian financial professionals have opportunities to obtain a deep understanding of 

Guardian’s product offerings, which enables them to better serve their plan and IRA 

clients. The BIC Exemption can be interpreted to favor fee-based compensation 

arrangements over transaction-based compensation arrangements. A transaction-based 

compensation structure is a better fit for accounts held by our middle and lower income 

customers. The usual asset-based account charge of 1.00% annually does not work 

efficiently with modest sized accounts because the charges over time will exceed the 

value of the services provided (typically a one-time sale as opposed to active ongoing 

trading). Also, the transaction-based compensation structure incentivizes the agent to 

 

7 For the purposes of this letter, the term “Retirement Investors” shall have the meaning set out in the BIC 

Exemption. 80 FR 21988.

8 For the purposes of this letter, the term “Best Interest Standard” shall have the meaning corresponding to 

the definition of “Best Interest” in the BIC Exemption, or, as appropriate, PTE 84- 24. 80 FR 21987, 

22020.
9

sell to holders of modest-sized accounts since the structure properly awards the agent 

for the time and attention needed to educate and explain complex products like 

annuities to prospective clients. In addition, the warranty requirement under the BIC 

Exemption that Guardian cannot employ compensation arrangements that “tend to” 

incentivize its representatives to not act in the “best interest” of the IRA owner sets a 

vague standard that will result in compliance challenges and great uncertainty for

almost any compensation arrangement that is currently utilized for the sale of 

proprietary products.

Guardian also believes that PTE 84-24 as currently proposed can be interpreted so that

Guardian and its affiliates cannot receive revenue sharing, 12b-1 fees or other third 

party payments in connection with the recommendation of a product issued by 

Guardian. If this is the case, Guardian will be unable to offer its products to ERISAgoverned plans at competitive prices, as it does today. Rather, in order to offer the 

superior service and other features of our product offerings to plan participants, 

Guardian will be required to increase the direct costs to the plans. Furthermore, the 

definition of “Insurance Commission” in the proposed PTE 84-24 does not appear to 

include certain “in kind” benefits (including healthcare coverage under Guardian’s 

benefit plans). Thus, Guardian and its representatives will not be able to be 

compensated in accordance with the arrangements that have been in existence for 

decades.

D. “Best interest” does not necessarily equal “lowest cost” and any bias in the Proposal 

toward “lowest cost” should be removed.

The current articulation of the Best Interest Standard, coupled with the Department’s 

solicitation for comments on a streamlined exemption for “certain high-quality low-fee 

investments,” overemphasizes the cost of investment products and services as the 

primary factor in determining whether one product or service should be recommended 

over another. We believe that this emphasis on costs puts Guardian and its 

representatives at risk of engaging in a non-exempt prohibited transaction when they

recommend a group variable annuity product to a plan fiduciary or an individual 

variable annuity product to an IRA. The higher cost of annuity products is due, in part,

to insurance company guarantees discussed above and embedded within those 

products. These products are inherently more expensive than simply making available 

a suite of mutual funds or other investments outside of an annuity. However, it is the 

guarantees in these products that afford plan participants and their beneficiaries and

IRA owners the security of lifetime income. As a result, the Best Interest Standard as 

it appears in the exemptions as proposed, along with the bias toward a streamlined 

exemption for low fee investments, may have the impact of limiting individuals’ access 

to these guaranteed, lifetime income solutions.
10

E. The Proposal potentially expands the scope of the rule beyond retirement plans and 

products to health and welfare plans. Health and welfare plans should be excluded 

from the Proposal.

It appears that the definition of “investment advice” under the Proposal could include 

a recommendation of a life, health, dental, disability or other insurance policy to a plan 

fiduciary or plan participant. An insurance policy providing plan benefits might 

reasonably be characterized as “other property” within the meaning of the advice 

definition. In addition, a footnote in the BIC Exemption states that such exemption 

may be used to exempt transactions involving health and welfare plans. Yet, the 

Department’s entire analysis and the focus of the Proposal are clearly the investment 

of plan assets and the marketing of investment products and services to retirement plans 

and IRAs. The Proposal includes no analysis on the effect of applying the fiduciary 

standard and the onerous conditions of the BIC Exemption to insurance products sold 

in the health and welfare market. Historically, the Department has assessed retirement 

plans versus health and welfare plans very differently. Guardian encourages the 

Department to continue this practice with respect to the Proposal and expressly exempt 

the application of the Proposal to health and welfare plans. In the event that the 

Department wishes to propose rules related to the sale of insurance products to health 

and welfare plans, such rules should only be proposed after a thoughtful assessment of 

the unique characteristics of these plans and products and the way they are sold and 

purchased in the employer marketplace. Additionally, Guardian urges the Department 

to preserve both the current rule and current prohibited transaction exemptions for sales 

in this market, pending further analysis.

III. Specific Comments Related to Highlighted Concerns

As discussed, we believe that several aspects of the Proposal will result in 

individuals and employers losing access to certain products and services provided by 

Guardian. Therefore, we recommend several changes to the Proposal as described below. 

A. To Preserve the Continued Availability of Lifetime Income Products to Middle 

and Working Class Consumers, the Definition of Investment Advice Must Be 

Revised and the Relevant Carve-Outs Should Cover All Plans and IRAs and All 

Annuity Platforms.

Group variable annuity contracts and individual annuities, particularly variable 

annuity contracts, include, by design, features that guarantee lifetime income. However, 

these are complex products. The sale of these products involves a great deal of time and 

expertise on behalf of a Guardian agent to explain the complexities of the products and the 

differences among them. Further, the agent provides a great deal of information to the plan 

fiduciary, plan participant or IRA owner so that he or she can make an informed decision 

regarding what product and underlying funds he or she should select. Under the Proposal, 

such activities will result in the agent and Guardian providing “investment advice” and 

thus becoming subject to a fiduciary standard even in situations where no reasonable plan 

fiduciary, plan participant or IRA owner would believe that the agent or Guardian is acting 

in the capacity of a fiduciary. Guardian believes that this result will limit the availability 
11

of products that offer lifetime income guarantees, and consumers’ access to them. 

Therefore, Guardian recommends several changes to the Proposal.

1. Narrow the Definition of Fiduciary

The Department is proposing to eliminate the current five-part test that must be 

satisfied to be considered a fiduciary and replace it with a two-part test that requires an 

Adviser and Financial Institution to determine (i) if recommendations of certain types 

(“Covered Advice”) will be made for compensation and (ii) if so, whether the advice is 

rendered “pursuant to a written or verbal agreement, arrangement or understanding that the 

advice is individualized to, or that such advice is specifically directed to, the advice 

recipient for consideration in making investment or management decisions with respect to 

securities or other property of the plan or IRA.”9 A “recommendation” is defined in the 

Proposal as “a communication that, based on its content, context, and presentation, would 

reasonably be viewed as a suggestion that the advice recipient engage in or refrain from 

taking a particular course of action.”10 In the Preamble, the Department states that the 

parties must have a “meeting of the minds” (i.e., agreement or understanding) that the 

advice is individualized or specifically directed to the plan or IRA, but no such “meeting 

of the minds” is required with regard to “the extent to which the advice recipient will 

actually rely on the advice.”11 

The proposed changes to the fiduciary definition are so broad that Advisers, 

Financial Institutions, Affiliates and Related Entities will almost always be considered 

fiduciaries for purposes of ERISA and the Code when they engage in routine sales to plans 

and IRAs.12 They could even become fiduciaries when they engage in activities incidental 

to the sales process. For example, mere conversations about available products and 

services (e.g., sales presentations) could be construed as fiduciary advice. Answering an 

IRA owner’s factual questions about an individual annuity could be fiduciary advice. In 

addition, the submission of a Request for Proposal (“RFP”) response could be considered 

advice to the extent the RFP includes a sample fund line up that could be made available 

under a group annuity or discusses certain products and services available to a plan or IRA. 

As another example, wholesalers who are hired by a product provider to promote the sale 

of their employer’s products, may be deemed to be fiduciaries because they are making 

recommendations to retail agents who would now be deemed fiduciaries in their 

discussions with ERISA plan and IRA customers.

The Proposal’s underlying premise that virtually every sales interaction involves 

fiduciary advice is inconsistent with normal business practices in which a buyer of a 

product or service would not reasonably expect that the seller is acting as a fiduciary during 

 

9 80 FR 21957. For the purposes of this letter, the terms “Adviser” and “Financial Institution” shall have 

the meanings set out in the BIC Exemption. 80 FR 21987.

10 80 FR 21960.

11 80 FR 21940.

12 For the purposes of this letter, the terms “Affiliates” and “Related Entities” shall have the meanings set 

out in the BIC Exemption. 80 FR 21987, 21988.
12

the sales process. 13 Unfortunately, while the Proposal includes a few “carve-outs” from 

the fiduciary definition, the only carve-out that addresses sales activities does not apply to 

IRAs and small participant-directed defined contribution plans, which make up a 

substantial majority of the retirement marketplace and Guardian’s primary customers. 

Further, unlike the current regulation under which all five elements of the five-part test 

must be met before fiduciary status is imposed, the Proposal essentially shifts the burden 

to the Adviser and Financial Institution to prove that it should not be treated as a fiduciary 

by demonstrating compliance with a carve-out. 

The breadth of the definition of fiduciary investment advice, the limited nature of 

the carve-outs and the shift of the burden of proof will effectively require Advisers, 

Financial Institutions, Affiliates and Related Entities to assume fiduciary status even in 

situations in which no plan fiduciary or IRA owner could reasonably expect that the 

Adviser or Financial Institution is acting in a fiduciary capacity. As a result, they will be 

required to assume the costs associated with complying with (or failing to comply with) 

the BIC Exemption or other potentially available exemptions, even when there is no 

expectation on the part of the plan fiduciary, plan participant or IRA owner that the Adviser 

or Financial Institution is acting other than in its own interest as a product distributor. 

 For these reasons, we urge the Department to modify the definition of “investment 

advice” under the regulation so that Advisers and Financial Institutions can engage in 

routine sales of products and services without becoming fiduciaries.

a. Delete the “specifically directed” prong: Under the Proposal, fiduciary 

status arises virtually any time that a communication is made that is in any way suggestive 

of a plan investment or investment management activity and is either individualized for, or 

is specifically directed to, an advice recipient for consideration. In our view, whether a 

recommendation is “specifically directed to” the recipient is irrelevant to the question of 

whether the parties to that communication should be viewed as having a fiduciary 

relationship. Institutions that offer products and services in the retirement plan marketplace 

generate targeted communications every day in the course of advertising and marketing to 

potential clients. Providers and distributors of annuities and other financial products 

require the freedom to utilize targeted marketing communications to identify consumers 

with an interest in potentially purchasing those products. Yet, under the Department’s 

Proposal, even a mass mailing or telephone campaign describing the range of Guardian

insurance products and their key features and pricing could be characterized as 

“specifically directed” to the recipients and thus potentially investment advice. It defies 

common sense to suggest that these types of generalized, albeit “specifically directed,” 

marketing communications should result in the establishment of a fiduciary relationship. 

If Financial Institutions cannot even contact potential clients without assuming fiduciary 

 

13 See e.g., Renfro v. Unisys Corp., 671 F.3d 314, 324 (3rd Cir. 2011) (“When a person who has no 

relationship to an ERISA plan is negotiating a contract with that plan, he has no authority over or 

responsibility to the plan and presumably is unable to exercise any control over the trustees' decision 

whether or not, and on what terms, to enter into an agreement with him. Such a person is not an ERISA 

fiduciary with respect to the terms of the agreement for his compensation.”), citing F.H. Krear & Co. v. 

Nineteen Named Trs., 810 F.2d 1250, 1259 ( 3rd. Cir. 2011).
13

status, retirement investors may never learn about products and services that may fit their 

needs. 

 We propose that the “specifically directed to” prong of the definition be deleted so that 

Advisers and Financial Institutions can engage in a routine sale process without 

becoming fiduciaries.

b. Revise the “individualized” prong: Guardian strongly believes that the 

“individualized to the advice recipient” element of paragraph (a)(2)(ii) should be modified 

to describe the nature of individualization that is needed to give rise to fiduciary status on 

the part of the advice provider. In our view, it is only where a communication with a 

Retirement Investor is sufficiently tailored, within the context of a particular relationship, 

to provide a basis for the investor’s reliance on an advice recommendation, that a fiduciary 

relationship should arise. 

The objective of a revised fiduciary definition should be to impose fiduciary 

standards on those who undertake to, or create the expectation that, they will be acting in 

a position of trust with respect to the advice recipient. The Department has stated 

throughout the Preamble that it views as “fiduciary” in nature those investment 

recommendations where there is an expectation that the advice provider will provide 

unbiased and impartial advice that is in the recipient’s best interest. See, e.g., 80 FR 21938 

(the Proposal “avoids burdening activities that do not implicate relationships of trust and 

expectations of impartiality.”); 80 FR 21941 (“In each instance, the proposed carve-outs 

are for communications that the Department believes Congress did not intend to cover as 

fiduciary ‘investment advice’ and that parties would not ordinarily view as 

communications characterized by a relationship of trust or impartiality.”) However, we do 

not agree that every communication or suggestion should be held to such a high standard 

when there is no reasonable expectation by either party that the agent will act in this 

capacity. 

We understand the Department’s reasoning in wishing to eliminate the requirement 

of a “mutual agreement” regarding how the advice will be utilized by the recipient. 

Nonetheless, we believe that there should be some arrangement, agreement or 

understanding that the advice is sufficiently individualized and provided under 

circumstances in which it is reasonable for the advice recipient to rely on that advice. 

 We recommend that the Department consider the following revision -

(2) Such person, either directly or indirectly (e.g., through or together with any 

affiliate),—

. . . 

(ii) Renders the advice (A) pursuant to a written or verbal agreement, arrangement 

or mutual understanding that the advice is individualized to or that such advice is 

specifically directed to, the advice recipient for consideration in making investment 
14

or management decisions with respect to securities or other property of the plan or 

IRA, and (B) under circumstances creating a reasonable expectation on the part of 

the advice recipient that advice will be provided in the interest of the advice 

recipient. 

c. Clarify the definition of recommendation: Under the Proposal, a 

recommendation is “a communication that, based on its content, context, and presentation, 

would reasonably be viewed as a suggestion that the advice recipient engage in or refrain 

from taking a particular course of action.” Though Guardian appreciates that the 

Department has taken this definition from FINRA guidance in an effort to coordinate its 

rulemaking with other regulators, we nevertheless believe that the articulated definition is 

over-inclusive.

FINRA guidance focuses not on the existence of a mere suggestion, but on whether 

there has been a communication that might reasonably be viewed as a “call to action” that 

might reasonably influence an investor to trade a particular security or group of securities. 

See NASD Notice to Members 01-23. Guardian believes that such FINRA guidance may 

usefully be applied to distinguish a zone of information that may be provided about 

investment products and services that objectively describes the features of an investment 

product or service (including performance and benchmarking information) but that falls 

well short of a “recommendation.” The definition of “recommendation” should allow a 

provider to market products and communicate with potential investors and purchasers 

about the provider’s products without becoming a fiduciary.

That being said, it appears that the Department is seeking to cover any 

conversations or communications where the advice provider is in a position of trust with 

respect to the advice recipient. Guardian nevertheless believes that not every investment 

provider that interacts with ERISA plans, ERISA plan participants and beneficiaries and 

IRA holders undertakes to provide unbiased investment advice solely in the client’s 

interest. Rather, whether the intervention would give rise to a fiduciary relationship ought 

to depend on the nature of the relationship being established. Further, Guardian believes 

that routine sales activities in the investment space, where sellers attempt to sell products 

in exchange for compensation for their sales activities, are appropriate activities in the 

ERISA context and should not be eliminated. We believe that the regulatory scheme 

proposed by the Department threatens to do. 

d. Need for a link between recommendation and a contemporaneous 

transaction: Additionally, the Department should clarify that a recommendation is 

“investment advice” only when it is linked to a contemporaneous transaction to purchase 

or sell a security or other property for compensation. A Guardian agent may make 

recommendations to trade a particular security or group of securities. However, the client 

may not actually trade for days, weeks or even months later and may make such trade 

through an entity other than Guardian. Guardian and its agent should not be viewed as 

making a recommendation in these circumstances. 

 Therefore, Guardian recommends that “recommendation” should be clarified so that a 

“recommendation” will only occur if the investor’s actions with regard to the 
15

transaction are contemporaneous with the communication from the Adviser and if the 

Adviser or the Financial Institution receives compensation for the transaction. 

2. Expand the Counterparty Carve-out to Cover All Plans and IRAs

The Department states that the “overall purpose” of the seller’s carve-out is “to 

avoid imposing ERISA fiduciary obligations on sales pitches that are part of arm’s length 

transactions where neither side assumes that the counterparty to the plan is acting as an 

impartial trusted adviser, but the seller is making representations about the value and 

benefits of proposed deals.” 80 FR 21941. The Department makes available a seller’s 

exception for a plan transaction if the independent fiduciary agrees in writing that it will 

not rely on the seller to act in the best interests of the plan, to provide impartial investment 

advice or to give advice in a fiduciary capacity, unless the plan has fewer than 100 

participants. IRAs are simply not covered by the seller’s carve-out.

For purposes of assessing fiduciary responsibility, however, ERISA makes no 

distinctions among plans based on size. ERISA commands all plan fiduciaries, regardless 

of plan size, to have sufficient knowledge and skill to make prudent decisions on behalf of 

the plan. See ERISA § 404(a)(1)(B). Where a fiduciary lacks the requisite expertise to 

make a decision, it is required to hire independent experts to supply it.14 In excluding small 

plans from the carve-out, the Department proposes to create two classes of fiduciaries. One 

unintended consequence of this is that sellers of investment products and services may be 

inclined to sell only to large plans. This will only reduce the number of providers willing 

to service the small plans, which is already an underserved market.

Based upon the foregoing, Guardian urges the Department to extend the 

counterparty carve-out to all plans and IRAs regardless of the number of participants. 

However, if the Department insists that the counterparty carve-out should not apply to 

small plans and IRAs, we suggest as an alternative that sales to sophisticated IRA owners 

or to small plans and IRAs that are represented by an investment adviser who is registered 

under state or federal securities laws (and thus subject to supervision by a state or federal 

agency with examination and enforcement authority) should be addressed as follows: 

 Include IRA owners who are sophisticated investors in the carve-out: We 

propose that the carve-out be extended to advice provided to sophisticated IRA 

owners. An IRA owner who is an “accredited investor” under SEC Rule 501 

of SEC Regulation D15 promulgated under section 4(a)(2) of the Securities Act 

of 1933, as amended (“Securities Act”) can purchase an interest in an 

investment fund without the fund’s interests becoming subject to registration 

under the Securities Act. Yet, omission of IRAs from the carve-out suggests 

that the very same purchaser cannot make sound investment decisions in 

managing his IRA. To the contrary, we believe that plan fiduciaries or IRA 

 

14 See, e.g., Liss v. Smith, 991 F. Supp. 278, 297 (S.D.N.Y. 1998) (“In such circumstances, where the 

trustees lack the requisite knowledge, experience and expertise to make the necessary decisions with 

respect to investments, their fiduciary obligations require them to hire independent professional advisors.”)

15 17 C.F.R § 230.500, et. seq. 
16

owners who are sophisticated investors can appreciate the difference between a 

sales pitch and unbiased advice, and advice to them should be “carved out.”16 

 Include small plans and IRAs represented by an adviser in the carve-out: The 

Department points to its cross-trading exemption as a basis for the $100 million 

dollar threshold. However, much like the 100 participant threshold, we do not 

see, and the Department does not provide, a connection between that $100 

million amount and the ability of an adviser to adequately act on behalf of a 

small plan or IRA. For example, under Regulation D, an employee benefit plan 

within the meaning of ERISA is an accredited investor as long as the decision 

to invest in the security is made by a plan fiduciary, as defined in section 3(21) 

of ERISA, which is either a bank, savings and loan association, insurance 

company or registered investment adviser (or, if the plan has at least $5 million 

in assets under management). In addition, if the plan is a participant-directed 

plan, the plan is an accredited investor if each of the participants is an accredited 

investor. Also, an “investment manager” as defined under ERISA section 

3(38), which includes a registered investment adviser, does not require that the 

manager have a certain amount of assets under management. 

Yet, the Proposal suggests that a party needs at least $100 million of benefit 

plan assets under management in order to recognize when an Adviser sells 

products and services rather than gives advice. We do not believe this to be the 

case. Rather, we believe that the carve-out should apply in any case in which 

the sponsor or similar fiduciary receives investment advice from a fiduciary as 

defined under ERISA section 3(21) who is a bank, savings and loan association, 

insurance company or registered investment adviser regarding the purchase of 

an investment product or service, so long as such fiduciary is independent from

the seller. In addition, if the sponsor or similar fiduciary does not receive advice 

from such a fiduciary, the dollar threshold should be $5 million of assets under 

management.

3. Confirm That There is No Need for a Platform and Selection and 

Monitoring Carve-out or Clarify the Application of the Carve-out to 

Variable Annuity Products

In our view, it is wholly inappropriate to require a carve-out for the provision 

of an investment platform because the courts and the Department have always taken the 

position that the creation of a platform is not a fiduciary act. Therefore, the Department 

should clarify that the provision for making available an investment platform is not 

included within the definition of “investment advice.” Alternatively, the platform carve-

 

16 An “accredited investor” includes individuals who have annual earned income of more than $200,000 

($300,000 with a spouse) or who have a net worth of more than $1,000,000. See 17 C.F.R. § 230.500 et

seq. The SEC explains that a “principal purpose of the accredited investor concept is to identify persons 

who can bear the economic risk of investing in these unregistered securities.” Investor Bulletin: Accredited 

Investors, S.E.C. Pub. No. 158 (Sept. 2013), available at: 

http://www.sec.gov/investor/alerts/ib_accreditedinvestors.pdf
17

out should be modified so that (i) group annuities are “platforms” for purposes of the carveout and (ii) IRA platforms, including individual variable annuities, qualify for the carveout. 

a. Creation of a platform is not a fiduciary act. The Department has 

indicated that a service provider to a plan or IRA does not act as a fiduciary by merely 

providing a platform of investments to such plan or IRA as long as a fiduciary independent 

of the platform provider approves the platform, such fiduciary receives notice regarding 

any changes to the platform, and such fiduciary approves by either affirmative or negative 

consent any changes to the platform that impact the plan.17 However, the Department also 

notes that in the event that the service provider or its affiliate provides investment advice 

for purposes of ERISA with regard to the selection of one or more investments on the 

platform and such advice results in the payment of additional compensation to the service 

provider or its affiliate, such service provider or affiliate could be viewed as using its 

fiduciary authority to increase its own compensation in violation of ERISA section 

406(b).18 As such, the service provider may act as a non-fiduciary with regard to creating 

the investment platform, but act as a fiduciary with regard to investment of plan or IRA 

assets in the platform investments. Further, we note that several courts have stated that a 

service provider does not act as a fiduciary when it makes available a platform of mutual 

fund investments to ERISA-governed plans.19

 Based upon the foregoing, the Department should clarify that the creation of a 

platform, in and of itself, does not involve fiduciary “investment advice,” unless 

the platform creator acknowledges fiduciary status in creating the platform. We 

believe that this approach is appropriate because the existence of a platform carveout implies that the creation of a platform could in fact result in the provision of 

investment advice under certain circumstances. This will unnecessarily expose 

platform providers to additional litigation and compliance risk. 

b. Variable annuity contracts are “platforms”: If the Department takes the 

position that platforms should be the subject of a carve-out, the Department should clarify 

that both group and individual variable annuities constitute “platforms” for purposes of the 

carve-out. The “variable” or investment portion of the contract provides for a number of 

mutual funds (or insurance company separate accounts that invest in mutual funds or 

collective investment trusts) to be offered as investment options under a plan or IRA. 

Guardian offers a number of investment options under its group and individual variable 

annuities with the intent of offering a broad range of investment alternatives to cover most

asset classes and to allow for adequate diversification. The plan sponsor (or similar 

fiduciary) or IRA owner selects from the investment options available under the plan or 

 

17 Adv. Op. 97-16A (May 22, 1997) (making available a menu of funds and the ability to change the funds 

offered under that menu did not rise to the level of a fiduciary act as long as an independent plan fiduciary 

approved the initial menu and had the opportunity to approve any changes to the menu with advanced 

notice of the proposed change). 

18Id.; see also DOL Adv. Op. 2003-09A (June 2, 2003).

19 See Hecker v. Deere & Co., 556 F.3d 525 (7th Cir. 2009); see also Leimkuehler v. Am. United Life Ins. 

Co., 713 F.3d 905 (7th Cir. 2013), Zang v. Paychex, 728 F.Supp.2d 261 (W.D.N.Y. 2010); Santomenno v. 

John Hancock Life Ins. Co., No 2:10-cv-01655 (WJM), 2013 WL 3864395 (D.N.J. 2013).
18

IRA. In the case of a plan, participants are then permitted to direct the investment of their 

account balances in the investment options made available under the plan by the fiduciary. 

As such, group and individual variable annuity contracts are indistinguishable 

from a platform of investments made available by a broker-dealer, recordkeeper, or other 

platform provider. While we do not necessarily read the Proposal to preclude group and 

individual variable annuities from the platform carve-out, we believe that the final 

regulation should make it clear that such annuities can qualify as a “platform” for purposes 

of the carve-out and that information about the investments under the annuity may be 

provided in accordance with the “selection and monitoring” carve-out. Failure to provide 

such clarity may make issuers unwilling to market annuities.

Guardian is concerned that if the Department does not clarify that the platform 

carve-out applies to annuities, Guardian’s call center representatives may not be able to 

provide information to plan participants and contractowners who already have purchased 

an annuity. Guardian is particularly proud of its award-winning call centers. Our call 

center representatives should be able to answer questions from plan participants and 

contractowners about the annuity contracts which they have already purchased from us. 

 

 One way to clarify the carve-out would be to add the underlined language to the 

first sentence of section 2510.3-21(b)(3) of the proposed regulation as follows “(3) 

Platform providers. The person merely markets and makes available to an 

employee benefit plan (as described in section 3(3) of the Act), without regard to 

the individualized needs of the plan, its participants, or beneficiaries, securities or 

other property through a platform or similar mechanism (including a variable 

annuity contract) from which a plan fiduciary may select or monitor investment 

alternatives. ” 

c. Confirm that the platform and selection and monitoring carve-outs are

available to IRA platforms: The Department specifically excludes IRAs from the 

platform carve-out, and the Department determined to do so because in the case of an IRA 

“there typically is no separate independent ‘plan fiduciary’ who interacts with the platform 

provider to protect the interests of the account owners. As a result, it is much more difficult 

to conclude that the transaction is truly arm’s length or to draw a bright line between 

fiduciary and non-fiduciary communications on investment options.” The Department 

requested “specific comment as to the types of platforms and options that may be offered 

to IRA owners, how they may be similar to or different from platforms offered in 

connection with participant-directed individual account plans, and whether it would be 

appropriate for service providers not to be treated as fiduciaries under this carve-out when 

marketing such platforms to IRA owners.” 

As discussed above, the Department’s exclusion of IRAs from the platform carveout fails to recognize its own prior position and that of the courts that the creation and 

making available of a platform is not a fiduciary act. Further, by excluding IRAs, the 

Department appears to assume that IRA owners are incapable of recognizing (i) when they 

are being offered an investment platform from which they may select one or more 

investment options and (ii) when advice is provided regarding in which of the investment 
19

platforms they should invest. We do not agree with this position. Guardian believes that

the proposed requirements in the platform carve-out are adequate to inform IRA owners 

that making available a platform of investment options and the provision of information 

about those options is not a recommendation of any particular investment option on the 

platform.

 We ask that the Department modify the introductory clause in section 2510.3-

21(b)(3) as follows “(3) Platform providers. The person merely markets and makes 

available to an employee benefit plan (as described in section 3(3) of the Act) or a 

plan (as defined in section 4975(e)(1) of the Code) .” 

d. Confirm that providing access to investment services does not create 

fiduciary status.

Similar to other product providers in the group plan market, Guardian’s group 

variable products provide access to investment advice and investment management 

services of independent third parties. 

These services are in addition to the investment options available under the 

group variable products. As a platform provider, Guardian merely provides information 

about the nature of these services and does not make any statements that should be 

considered individualized or specifically directed to plan sponsors or plan participants who 

may choose to enter into agreements with these independent third parties to subscribe to 

these services. 

 We believe that the Department should clarify that providing information about the 

availability of such services is within the scope of the platform carve-out and that 

platform providers should not be considered fiduciaries as a result of providing this 

information.

B. PTE 84-24 Should Apply to All Sales and Advice Pertaining to Annuities to Avoid 

Investor Confusion

In the Proposal, purchase and sale transactions in connection with annuity contracts 

that are securities for purposes of the securities laws, which typically are individual 

variable annuity contracts, are subject to the BIC Exemption, while such transactions 

involving annuity contracts that are not securities, which are typically fixed annuities and 

some group variable annuities that are exempt from the securities laws, are subject to PTE 

84-24. The basis for the Department’s subjecting some annuities to the BIC Exemption is 

“that investment advice transactions involving annuity contracts that are treated as 

securities and transactions involving the purchase of mutual fund shares should occur under 

the conditions of the Best Interest Contract Exemption due to the similarity of these 

investments, including their distribution channels and disclosure obligations, to other 

investments covered in the Best Interest Contract Exemption.”20

Guardian disagrees with the Department’s assumption and believes that the 

coverage of some annuities under the BIC Exemption and others under PTE 84-24 is 

 

20 80 FR 21965.
20

unnecessary and will be disruptive to the sales and purchase of, and provision of advice 

related to, individual annuities and group annuity products. While annuities that are treated 

as securities for securities law purposes include underlying mutual fund or similar 

investment options, Guardian believes those products should be treated as insurance

products under the Proposal. Guardian offers individual variable annuity contracts that 

include features such as guaranteed death benefits and guaranteed minimum withdrawal 

benefits. Like fixed annuities, which the Department intends to address under PTE 84-24, 

variable annuities are subject to state insurance regulation. In addition, the Department has 

proposed to require the application of the Impartial Conduct Standard to PTE 84-24, which 

should provide variable annuity contract owners with protection against any concerns of

the Department. 

 Therefore, we ask that the Department provide that all annuity sales be covered by 

PTE 84-24. We believe doing so will adequately protect investors, while 

preserving what we understand to be the intent of the Department, which is to cause 

minimal disruption to industry distribution and compensation practices while 

protecting investors. Reliance on PTE 84-24 for all annuity sales has been the 

practice since its issuance decades ago. Guardian believes PTE 84-24 has always 

offered adequate protections and the addition of the Impartial Conduct Standards 

will reinforce that.

C. The Proposal Should Clarify that Guardian and Affiliates May Receive Revenue 

Sharing and Other Third Party Payments for Proprietary Sales So That Current 

Product Pricing That is Beneficial to Small Plans and Individual IRA Owners 

Can be Preserved

We believe that the new definitions of “Insurance Commission” and “Mutual Fund 

Commission” under PTE 84-24 may be interpreted to prohibit Guardian and its affiliates 

from receiving revenue sharing and other third party payments from the mutual funds 

offered under its group annuities and individual annuities. Furthermore, in the case of a 

proprietary annuity, Guardian may not be able to receive fees paid in connection with the 

cost of the guarantee and the administration of the contract. In Guardian’s case, no revenue 

sharing or third party payments are paid to the agent. Rather, those payments and the fees 

paid to Guardian in its capacity as an issuer are paid to Guardian and its Affiliates. Those 

amounts are used to, among other things, help the plan and IRA pay for services necessary 

to operate the plan, such as recordkeeping, trustee and custodial services. Guardian also 

makes available to ERISA-governed plans investment advice services provided by an 

independent ERISA section 3(21) fiduciary and an independent ERISA section 3(38) 

fiduciary. If these payments cannot be retained, Guardian (and other insurers) will not be 

able to offer the group annuities and individual annuities at the competitive prices that they 

do today or will not be able to make certain services available without charging additional 

amounts to Retirement Investors. 

Currently, fiduciary recommendations of annuities and proprietary and nonproprietary mutual funds to the plan fiduciaries and IRAs, regardless of the size of the 

investor, may be exempt under PTE 84-24. However, the Department has proposed to 

amend this exemption in a way that would make it impossible for Guardian and its affiliates 
21

to receive 12b-1 fees, shareholder servicing fees, sub-transfer agent fees, revenue sharing 

and other third party payments in connection with the purchase of Guardian’s or another 

issuer’s annuities or affiliated and unaffiliated mutual funds or separate accounts made 

available under the annuity. Additionally, Guardian could not receive other fees paid to it 

as an issuer of the annuity. 

The proposed PTE 84-24 defines “Insurance Commission” as “a sales commission 

paid by the insurance company or an Affiliate to the insurance agent or broker or pension 

consultant for the service of effecting the purchase or sale of an insurance or annuity 

contract, including renewal fees and trailers...” However, the definition specifically 

excludes “revenue sharing payments, administrative fees or marketing payments, or 

payments from parties other than the insurance company or its Affiliates.” Similarly, the 

definition of ‘‘Mutual Fund Commission’’ includes a “commission or sales load paid either 

by the plan or the investment company for the service of effecting or executing the purchase 

or sale of investment company shares,” but specifically excludes “a 12b-1 fee, revenue 

sharing payment, administrative fee or marketing fee.” 

We note that the current version of PTE 84-24, Part III(c) exempts “the effecting 

by an insurance agent or broker, pension consultant or investment company principal 

underwriter of a transaction for the purchase, with plan assets, of an insurance or annuity 

contract or securities issued by an investment company.” We and others have understood 

this provision to provide relief for any conflict of interest that we and our agents may have 

in recommending Guardian and non-Guardian annuities or funds, which includes the 

receipt of mutual fund advisory fees, 12b-1 fees, revenue sharing payments, administrative 

fees, marketing fees and similar amounts. Significantly, the revised PTE 84-24 contains 

an identical description of the covered transaction – “the effecting of” a purchase of an 

annuity contract or investment company shares. See PTE 84-24, Part I(a)(3). However, 

the proposed changes to the definitions of “Insurance Commission” and “Mutual Fund 

Commission” previously discussed call into question whether the Department views such 

payments to the insurer or other payments to the insurer in its capacity as issuer of the 

annuity as permissible under PTE 84-24. 

 We ask that the Department confirm that an insurance company, mutual fund 

underwriter or their affiliates may continue to receive payments in connection with 

the sale of their annuities and mutual funds under Part I(a)(3), notwithstanding the 

revised definition of “Insurance Commission” and “Mutual Fund Commission.” 

D. The Proposal Should be Revised to Remove Bias Against Proprietary Products 

and Overemphasis on Cost So That Plans and IRA Owners Continue to Have 

the Right to Choose Among a Wide Variety of Products and Compensation 

Models

The Department’s attempt to articulate the meaning of ERISA’s duty of loyalty 

through its Best Interest Standard is unnecessary and only exposes Guardian and its agents 

to compliance and litigation risk that currently is not present under PTE 84-24 if a Guardian

agent sells a proprietary group annuity or individual annuity over a non-proprietary group 

annuity or individual annuity. Such exposure could make guaranteed lifetime income

unaffordable for many consumers. In addition, this articulation of the Best Interest 
22

Standard combined with the introduction of the possibility of a streamlined exemption 

overemphasizes the importance of cost as a determinative factor in recommending an 

investment product. Given the fact that products that include guarantees are more 

expensive that those that do not, the Department may inadvertently reduce the availability 

of products that guarantee lifetime income because Advisers and Financial Institutions may 

be more inclined to recommend cheaper products (i.e., those without guarantees) in order 

to avoid liability.

1. The Definition of “Best Interest” Should Mirror Language in ERISA 

Section 404(a) 

As a condition of receiving section 406(b) relief under both PTE 84-24 and the BIC 

Exemption, the fiduciary adviser must act “... with the care, skill, prudence, and diligence 

under the circumstances then prevailing that a prudent person would exercise based on the 

investment objectives, risk tolerance, financial circumstances, and needs of the Retirement 

Investor, without regard to the financial or other interests of the Adviser, Financial 

Institution, any Affiliate or other party...” Prop. PTE 84-24 §VI(b); Prop. BIC Exemption 

§ VIII(d). 

According to the Department,“[t]he best interest standard is defined to effectively 

mirror the ERISA section 404 duties of prudence and loyalty, as applied in the context of 

fiduciary investment advice.” 80 FR 21970. Apparently, the Department added this 

condition to extend ERISA-type duties to IRA advisers, who are not subject to section 404, 

rather than to create new duties for plan fiduciaries. Id.; 80 FR 21970. 

However, the Proposal’s language “without regard to the financial or other interests 

of the Adviser, Financial Institution, any Affiliate, Related Entity, or other party” appears 

to be contrary to long-standing principles found under ERISA. Under ERISA’s duty of 

loyalty, a fiduciary may realize incidental benefits as a result of performing its fiduciary 

duties without breaching his or her duty of loyalty. In fact, the U.S. Supreme Court has 

held that a fiduciary does not violate ERISA simply by taking action otherwise consistent 

with ERISA’s duty of loyalty if such action incidentally benefits the fiduciary.21

Yet, the “without regard to” language raises the possibility that absolutely no 

incidental benefits are permitted. Without clarification of ambiguous terms in the Proposal 

or revision of the Proposal, we believe that this standard will present daunting challenges 

and is arguably unachievable in respect to the sale of proprietary products like group or 

individual annuities. In addition, even if this is not the Department’s intent, Guardian will

face uncertainty for years to come as the federal courts in the case of ERISA plans and 

state courts in the case of IRAs parse out the meaning of the “without regard to” language. 

Accordingly, rather than create yet another fiduciary standard, we urge the 

Department to provide much needed certainty to advisers and their clients by expressly 

incorporating into the Best Interest Standard the duty of loyalty language found under 

section 404 of ERISA. This would ensure that, as intended by the Department, this 

 

21 See Hughes Aircraft v. Jacobson, 525 U.S. 432 (1999); Lockheed Corp. v. Spink, 517 U.S. 882 (1996).
23

condition would in fact be “interpreted in light of forty years of judicial experience with 

ERISA’s fiduciary standards and hundreds more with the duties imposed on trustees under 

the common law of trusts.” 80 FR 21970.

 Therefore, we urge the Department to modify the Best Interest Standard in PTE 84-

24 to require the fiduciary adviser to act: 

... (i) with the care, skill, prudence, and diligence under the circumstances then 

prevailing that a prudent person would exercise based on the investment objectives, 

risk tolerance, financial circumstances and needs of the plan or IRA, without regard

to the financial or other interests of the fiduciary, any affiliate or other party and 

(ii) solely in the interest of the Retirement Investor, in each case as such standards 

have been interpreted under Section 404 of ERISA.

 Further, we urge the Department to modify the Best Interest Standard in the BIC 

Exemption to require the fiduciary adviser to act: 

... (i) with the care, skill, prudence, and diligence under the circumstances then 

prevailing that a prudent person would exercise based on the investment objectives, 

risk tolerance, financial circumstances, and needs of the Retirement Investor, and 

(ii) solely in the interest of the Retirement Investor, in each case as such standards 

have been interpreted under Section 404 of ERISA without regard to the financial 

or other interests of the Adviser, Financial Institution or any Affiliate, Related 

Entity, or other party.

2. Clarify that Lowest Cost is Not Required

 We also ask the Department to acknowledge that an adviser need not recommend 

non-proprietary products or the “lowest cost” product in order to comply with the 

Best Interest and Impartial Conduct Standards.

22

The Department’s current guidance, including PTE 77-4 and PTE 84-24, contemplates that 

a fiduciary can provide advice to invest in a proprietary product and still meet ERISA’s 

duty of loyalty requirements. Further, the Department and the courts have long recognized 

that cost is simply one factor among several, including quality of the product or service,

that is to be considered when making any fiduciary decision. 

3. The Department Should Not Proceed with its Consideration of a

Potential Streamlined High Quality/Low Cost Exemption

Guardian does not support the concept of a special, streamlined exemption for 

“certain high-quality low-fee investments” designed as an alternative to the BIC Exemption 

or other exemptions with significant conditions. We expect that an exemption of this type 

would favor passive investment vehicles (e.g., index funds), which are not necessarily the 

 

22 For the purposes of this letter, the term “Impartial Conduct Standards” shall have the meaning set out in 

the BIC Exemption, or PTE 84-24, as appropriate. 80 FR 21984, 22018.
24

most appropriate investments for all investors. While some investors may not wish to pay 

for active management, many others still believe that active management can add value. 

In addition, products with guaranteed lifetime income in most cases will be more expensive 

as there is a cost associated with providing such guarantees. Additionally, it would be 

difficult to avoid the perception that, whatever the designated investment type, it would 

have received the tacit approval by the Department. The plan fiduciaries and IRA owners 

with the help of their advisers (not the Department) should make determinations as to what 

investments are prudent and appropriate. More importantly, there is no reason to believe 

that the potential for self-interested recommendations is lower when someone is selling 

“high quality low-fee investments.”

Finally, even the suggestion of a “separate streamlined exemption” for advice 

related to “certain high-quality low-fee investments” is contrary to prior positions by the 

Department and the courts that ERISA does not require (or even permit) a fiduciary to 

recommend or select investments based solely on cost; instead, ERISA requires a review 

of quality of services and other factors. Cost is only one such factor. 

 As a result, Guardian believes that the Department should not proceed with 

consideration of the streamlined high quality/low cost exemption. 

E. Disincentives to Sell Annuity Products Found in the BIC Exemption and PTE

84-24 Should be Removed so that Guaranteed Lifetime Income Solutions are 

Readily Available 

 

Guardian is concerned that the BIC Exemption may be interpreted by a court to 

require that an Adviser and Financial Institution adopt “fee for service” or other 

arrangements rather than transaction-based fee arrangements. A “fee for service” structure 

is not in line with traditional compensation models currently present in the group annuity

and individual annuity markets. Typically, the Adviser is compensated on a commission 

basis, the Financial Institution and its Affiliates receive 12b-1 fees, revenue sharing and 

other third party payments for, among other things, the provision of plan-related services 

(e.g., recordkeeping) and the issuing insurance company may receive fees in connection 

with the cost of the guarantees and the administration of the contract, a portion of which 

may be used to pay plan-related services. In our view, it would generally not be feasible

to offer a group annuity or individual annuity on a “fee for service” or level-fee basis. 

Additionally, Guardian’s agents (and agents of other insurers) receive “in kind” benefits,

such as health care coverage under Guardian’s health benefit plans for selling certain 

products. The receipt of these kinds of benefits may be construed as not in conformance 

with the BIC Exemption and PTE 84-24 if they are credited for the benefits with regard to 

the sale of certain products, but not others. The inability to receive these traditional forms 

of compensation while still complying with the BIC Exemption and PTE 84-24 may result 

in the limited availability of and consumer access to products such as group annuities and 

individual annuities because agents and insurance companies will be dissuaded (or 

prevented by their broker-dealers) from selling them.
25

1. Clarify the Proposal so that it is Clear that Transaction-Based 

Compensation (Including the Receipt of Revenue Sharing) is Permitted 

Under the BIC Exemption

The BIC Exemption requires that the Adviser and Financial Institution warrant in 

a written contract with the Retirement Investor that the Adviser and Financial Institution 

will conform to an Impartial Conduct Standard. Among other things, the standard requires 

that the Adviser act in the “Best Interest” of the Retail Investor. The Adviser and Financial 

Institution act in the “Best Interest” if they provide “advice that reflects the care, skill, 

prudence, and diligence under the circumstances then prevailing that a prudent person 

would exercise based on the investment objectives, risk tolerance, financial circumstances, 

and needs of the Retirement Investor, without regard to the financial or other interests of 

the Adviser, Financial Institution or any Affiliate, Related Entity, or other party.” We 

discussed above the need to revise the language in the BIC Exemption to conform with the 

language in ERISA section 404(a).

Additionally, apart from the Impartial Conduct Standard, the Adviser and Financial 

Institution must warrant to a number of things including that “Neither the Financial 

Institution nor (to the best of its knowledge) any Affiliate or Related Entity uses quotas, 

appraisals, performance or personnel actions, bonuses, contests, special awards, 

differential compensation or other actions or incentives to the extent they would tend to 

encourage individual Advisers to make recommendations that are not in the Best Interest 

of the Retirement Investor” (emphasis added).23 The Proposal goes on to provide that the 

aforementioned warranty provision “does not prevent the Financial Institution or its 

Affiliates and Related Entities from providing Advisers with differential compensation

based on investments by Plans, participant or beneficiary accounts, or IRAs, to the extent 

such compensation would not encourage advice that runs counter to the Best Interest of the 

Retirement Investor (e.g., differential compensation based on such neutral factors as the 

difference in time and analysis necessary to provide prudent advice with respect to different 

types of investments would be permissible).” 

The Department has stated that the BIC Exemption is designed to preserve 

“common fee practices” (subject to compliance with “basic standards”) as the definition of 

fiduciary advice is expanded. Although the Department asserts that the exemption’s 

Material Conflicts rule “does not mandate fee leveling” (80 FR 21971),24 which is, as 

explained, not common in the group annuity and individual annuity marketplace. 

However, the Proposal appears to effectively do just that. For example, in explaining how 

a Financial Institution might structure a compensation arrangement so that it does not “tend 

 

23 The Proposal would also require the Adviser to warrant that it has policies and procedures “designed to 

mitigate the impact of Material Conflicts of Interest and ensure that its individual Advisers adhere to the 

Impartial Conduct Standards” and has “adopted measures to prevent the Material Conflicts of Interest from 

causing violations of the Impartial Conduct Standards.” Prop. Reg. II(d)(2),(3).

24 “The exemption permits fiduciaries to continue to receive a wide variety of types of compensation that 

would otherwise be prohibited. It seeks to preserve beneficial business models by taking a standards-based 

approach that will broadly permit firms to continue to rely on common fee practices, as long as they are 

willing to adhere to basic standards aimed at ensuring that their advice is in the best interest of their 

customers.” 80 FR 21966. The BIC Exemption defines a “Material Conflict of Interest” at 80 FR 21988.
26

to encourage individual Advisers to make recommendations that are not in the Best Interest 

of the Retirement Investor,” it specifies five examples of compensation structures that 

could satisfy the contractual warranty including (i) independently certified computer 

models, (ii) asset-based compensation, (iii) fee offset, (iii) differential payments based on 

neutral factors and (iv) alignment of interests. None of these conform to the abovedescribed transaction-based fee model that is most commonly found in the group annuity

or individual annuity marketplace. In fact, we would argue that these transaction-based fee 

arrangements do not raise a conflict under 406(b) or similar provisions under the Code such 

that an exemption would not be necessary. We believe that the marketplace has adopted 

various compensation structures for sales made by insurance and broker-dealer agents in a 

way that competitively reflects the differences in products and services and the effort 

required to sell these products and services. Also, as described above, the payment of third 

party payments like revenue sharing may not be permitted to be received in light of the 

language in the BIC Exemption. 

At the least, the Material Conflicts rule introduces a broad, vague and subjective 

standard that will drive financial professionals to level fees or, more likely, invite a slew 

of plaintiffs’ class action lawsuits challenging current fee practices as being violative of 

the “tend to encourage” language in the Material Conflicts standard. Even worse, we can 

envision Advisers not wanting to sell products that afford the benefit of guaranteed lifetime 

income.

 We encourage the Department to consider a simpler approach to conflict mitigation, 

substituting the following for section II(d) of the proposed BIC Exemption: 

(d) Warranties. The Adviser and Financial Institution affirmatively warrant the 

following:

...

(2) The Financial Institution has adopted written policies and procedures reasonably 

designed to mitigate the impact of Material Conflicts of Interest and ensure that its 

individual Advisers adhere to the Impartial Conduct Standards set forth in Section 

II(c), which policies and procedures shall be deemed sufficient if compliant with 

Section 15(b)(4)(E) of the Securities Exchange Act, and Section 203(e)(6) of the 

Investment Advisers Act, as applicable; 

...

(4) The use, by Neither the Financial Institution, or, nor (to the best of its 

knowledge) any Affiliate or Related Entity of uses quotas, appraisals, performance 

or personnel actions, bonuses, contests, special awards, differential compensation 

or other actions or incentives to the extent they would tend to encourage has not 

caused, or will not cause, the individual Advisers

25 to make recommendations that 

 

25 It appears to us that these conflict mitigation rules are intentionally focused on ensuring that the 

compensation and other inducements provided to the individual Adviser do not affect his or her fiduciary 
27

are not in the Best Interest of the Retirement Investor. Notwithstanding the 

foregoing, the contractual warranty set forth in this Section II(d)(4) does not 

prevent the Financial Institution or its Affiliates and Related Entities from providing 

Advisers with differential compensation based on investments by Plans, participant 

or beneficiary accounts, or IRAs, to the extent such compensation would not 

encourage advice that runs counter to the Best Interest of the Retirement Investor 

(e.g., differential compensation based on such neutral factors as the difference in 

time and analysis necessary to provide prudent advice with respect to different 

types of investments would be permissible).

Even though relief under the BIC Exemption “is not conditioned on compliance 

with the warranty,” the inclusion of such warranties in an agreement with clients exposes 

Guardian, along with other Financial Institutions, to the potential of multitudinous lawsuits 

for inadvertent breaches of such warranties. Therefore, Guardian urges the Department to 

acknowledge that Financial Institutions will be deemed to have compliant policies and 

procedures if those policies and procedures satisfy similar requirements under U.S. 

securities laws such as Section 15(b)(4)(E) of the Securities Exchange Act and Section 

203(e)(6) of the Investment Advisers Act, both of which address the steps necessary to 

mitigate conflicts of interest. Importantly, market participants already use and comply with 

the process reflected in these securities laws.

2. Clarify PTE 84-24 so that Certain “In Kind” Compensation Including 

Ordinary Employee Benefits is an “Insurance Commission” 

If the requirements of the exemption are met, PTE 84-24, as proposed, permits the 

payment of an “Insurance Commission” to the Adviser. An Insurance Commission is

defined as “a sales commission paid by the insurance company or an Affiliate to the

insurance agent or broker or pension consultant for the service of effecting the purchase or 

sale of an insurance or annuity contract, including renewal fees and trailers.” The definition 

then goes on to exclude payments from other parties. 

Guardian is concerned that under PTE 84-24, the only compensation that an 

Adviser may receive for the sale of group annuities to plans and for the sale of other 

insurance and annuities to both plans and IRAs is an “Insurance Commission.” However, 

the definition of “Insurance Commission” does not appear broad enough to include 

compensation in the form of health care coverage or similar benefits under Guardian’s 

benefit plans. Guardian believes that the definition of “Insurance Commission” should 

include such benefits as they are an important part of a Guardian agent’s compensation and 

a failure to exempt that compensation may result in agents not selling variable annuity and 

other products that offer guaranteed lifetime income. In addition, Guardian is not aware of 

any evidence that would suggest the payment of such compensation raises a conflict of 

interest that would prohibit the Adviser from acting in accordance with the Best Interest 

Standard. FINRA Rule 2320 prohibits, with some exceptions, the payment of “non-cash 

 

recommendations. We ask that the Department expressly confirm that the “conflict mitigation” described 

in the Proposal under the Impartial Conduct Standards is focused on Adviser conflicts and that any 

“interests” that the Financial Institution may have in the recommendation is not imputed to the Adviser for 

these purposes.
28

compensation” in connection with the sale and distribution of variable contracts of an 

insurance company, but the rule defines “cash compensation” to include the payment of an 

“employee benefit.” When it promulgated the rule, the NASD clarified that it did not 

intend to include “payments of ordinary employee benefits” within the prohibitions of noncash compensation. NASD, Notice to Members 98-75, 578 (Sep. 1998), available at

http://www.finra.org/sites/default/files/NoticeDocument/p004887.pdf.

 Therefore, we suggest that the definition of “Insurance Commission” be modified 

as follows:

‘‘Insurance Commission’’ mean a sales commission paid by the insurance company 

or an Affiliate to the insurance agent or broker or pension consultant for the service 

of effecting the purchase or sale of an insurance or annuity contract, including, but 

not limited to, benefits under one or more employee benefit plans as defined under 

ERISA section 3(3), renewal fees and trailers, but not revenue sharing payments, 

administrative fees or marketing payments, or payments from parties other than the 

insurance company or its Affiliates.

F. Specific Elements of the BIC Exemption Must Be Revised and Simplified so 

that it Can Meet its Goal of Benefitting Plans and Plan Participants and IRA 

Owners 

1. Increased Compliance Costs and Litigation Costs

If the Department’s regulation is adopted as proposed, we believe that most sales 

presentations to plan fiduciaries and IRA holders will be considered fiduciary advice or, at 

the least, there will be a meaningful risk that such advice will be found to have been 

provided, whether a fiduciary relationship is intended by the parties or not. In that case, 

the BIC Exemption will become an essential part of Guardian’s compliance strategy in its 

dealings with ERISA plans, participants and IRA owners.

However, in addition to the issues we have already described, there are a number 

of requirements in the BIC Exemption that will expose Guardian to extensive compliance 

and litigation risks in complying with (or inadvertently failing to comply with) the 

requirements of the BIC Exemption. We believe the BIC Exemption can be modified in 

several ways so that Retirement Investors will continue to be protected while not unduly 

increasing the compliance and litigation costs associated with BIC Exemption compliance.

a. Modify the Written Agreement Requirements with respect to timing, 

Adviser as a party and affirmative consent by the Retirement Investor. The BIC 

Exemption requires that the Retirement Investor enter into a tri-party agreement with the 

Financial Institution and the Adviser before any investment advice is provided to the 

Retirement Investor. We have three concerns with this requirement.

First, requiring a contract this early in the process is simply untenable in the normal 

course of business dealings between a prospective client and the Adviser and Financial 

Institution. It will be impractical, and we believe unacceptable to Guardian’s prospective 
29

clients, to require them to enter into a written agreement before they can receive any 

meaningful information about what services and products Guardian may be able to offer. 

In addition, this requirement will lead to awkward and uncomfortable business dealings

with prospective clients. For example, conversations between a Retirement Investor may

start out as education and thus subject to a carve-out, but suddenly turn to “investment 

advice” as soon as the investor asks a question about Guardian’s specific products. At that 

point, the Adviser must stop the conversation and ask the investor to sign a contract, which 

is simply not practicable. 

Second, it is unnecessary to require individual Advisers to sign the written 

agreement. The provisions required to be included in the written agreement largely address 

the Financial Institution’s oversight of the Adviser. It adds no protection for the Retirement 

Investor to require the Adviser to individually be a party to this type of agreement and 

simply adds to the administrative burden of the written agreement condition. 

Third, if the purpose of the written agreement is to ensure that the Financial 

Institution provides the required disclosures and is contractually bound by the Impartial 

Conduct Standards and Warranties described in Part II(A), an affirmative consent 

(signature) by the Retirement Investor is not necessary. In fact, the ability to obtain a 

signature may not be possible if the advice is provided over the phone or over the internet 

through video conferencing. We request that the Department confirm that the contract 

requirement would be satisfied if the Retirement Investor’s agreement is obtained by 

negative consent. 

 To address each of these three points, we propose that Section II(a) of the BIC 

Exemption be amended as follows: 

Contract. Prior to recommending that the Plan, participant or beneficiary

account, or IRA purchase, sell or hold the Asset Prior to the execution of the 

recommended purchase or sale subject to relief under Section I, the Adviser and

Financial Institution enters into a written contract with the Retirement Investor that 

incorporates the terms required by Section II(b) – (e). An agreement shall not fail 

to satisfy this provision solely because the agreement of the Retirement Investor 

was obtained by negative consent. 

b. Eliminate the disclosure requirements. Guardian urges the Department to 

remove the various disclosure requirements from the BIC Exemption (e.g., Compensation 

Disclosure – Point of Sale and Annual, Website Disclosure, etc.). Guardian and other 

companies already provide numerous other disclosures including fact sheets, buyer’s 

guides, prospectuses, and benefit illustrations. In addition, Guardian already provides a 

large amount of disclosure in connection with PTE 84-24, section 408(b)(2) of ERISA, and 

section 404(a)(5) of ERISA. Many elements of the proposed additional required 

disclosures would need to be obtained from third parties such as mutual fund families. 

Guardian would have no means of verifying the accuracy of the information. Costly new 

systems would be required to facilitate the calculation and distribution of this information. 

We do not believe an additional layer of disclosures will be at all helpful to participants 
30

and IRA owners. The additional disclosure will only confuse participants and IRA owners 

and increase costs that customers may pay. 

Guardian believes that section 408(b)(2) already provides for the appropriate 

disclosures. Financial Institutions have devoted significant financial and compliance 

resources to complying with the Department’s 408(b)(2) disclosure regulation. However, 

the Department appears to believe that different, additional disclosures are necessary. The 

Department should not require the point of sale, annual, and website disclosures, as 

proposed. Rather, the Department should require disclosures based upon its own section 

408(b)(2) regulation.

c. Expand grandfathering: Guardian urges the Department to carefully consider 

the administrative burdens imposed by the proposed BIC Exemption when it considers a 

final rule. 

 We propose that all arrangements or agreements between an Adviser and a 

Retirement Investor entered into before the effective date of the exemption be 

excepted from the requirements of the BIC Exemption, provided that when entered 

into they were in compliance with then current law. 

This would extend so that all existing sales and new transactions under those agreements 

(e.g., additional deposits or premium payments, re-allocations, follow-up communications, 

etc.) are covered by prior law. In addition, amendments to those agreements should not 

cause the loss of the grandfathering. Complete grandfathering of all arrangements or 

agreements entered into prior to the effective date of the BIC Exemption is necessary 

because the price of products sold in the past could not have taken into account the 

additional costs and administrative burdens imposed by the BIC Exemption. 

2. Clarification Regarding the Application of the BIC Exemption to 

Rollovers

The BIC Exemption “permits Advisers, Financial Institutions, and their Affiliates 

and Related Entities to receive compensation for services provided in connection with a 

purchase, sale or holding of an Asset by a Plan, participant or beneficiary account, or IRA, 

as a result of the Adviser’s and Financial Institution’s advice to” Retirement Investors. The 

BIC Exemption defines the term “Asset” at 80 FR 21987. We note that the definition of 

this term does not include an IRA. While we believe that the Department intended to cover 

“investment advice” provided in the context of a rollover recommendation, we are 

concerned that the exemption could be interpreted otherwise.

In our view, the typical rollover advice transaction will consist of four separate 

recommendations: (i) a recommendation to take a distribution “from” the plan; (ii) a 

recommendation to hire the Adviser; (iii) the recommendation to rollover to an IRA; and 

(iv) the recommendation regarding how to invest the assets of the IRA once rolled over. 

Pursuant to the proposed definition of “investment advice,” the Adviser acts as a fiduciary 

with respect to each of the recommendations. 
31

 We ask that the Department confirm that the BIC Exemption will apply to all four 

of these recommendations. This issue could be addressed by simply adding a 

statement to the preamble of the final exemption such as, “The Department intends 

that the best interest contract exemption apply to all transactions connected to the 

Adviser’s and Financial Institution’s providing advice regarding a rollover 

distribution including (i) a recommendation to hire the Adviser; (ii) a 

recommendation to take a distribution from a Plan or IRA; (iii) a recommendation 

to roll over the distribution to an IRA; and (iv) a recommendation regarding the 

purchase of an Asset by the IRA with the proceeds of the amount rolled over.”

3. Elimination of the Warranty Requirement from the BIC Exemption

The provisions of the BIC Exemption require that the “Adviser and Financial 

Institution affirmatively warrant” that (i) the Adviser, Financial Institution, and Affiliates 

will comply with all applicable federal and state laws, (ii) the Financial Institution has 

written policies and procedures designed to mitigate the impact of conflicts of interest, (iii) 

the Financial Institution has identified conflicts and mitigated them, and (iv) the Financial 

institution does not use compensation and other arrangements that “tend to cause” Advisers 

to not act in accordance with the Best Interest Standard. The Department states in the 

Preamble that the warranty provision is not a condition of the exemption, thus presumably 

Guardian or its agent would not be subject to an excise tax in the event the warranty 

provision is violated. 

A “warranty” implies a guarantee of compliance, which to our knowledge is not 

found in any class exemption ever issued by the Department and unfairly establishes a 

precedent that perfection is required to establish compliance. In addition, the fact that the 

Department states that Guardian will not lose the benefits of the exemption offers little 

consolation. The warranty will only make it easier for plaintiff’s class action lawyers to 

identify technical compliance “foot faults” as a basis for bringing class action lawsuits. We 

believe that the BIC Exemption, even modified as we recommend, provides adequate 

protection to investors and the addition of the warranty requirement only unnecessarily 

creates litigation risk. Therefore, the Adviser and Financial Institution should not be 

required to “warrant” compliance under the BIC Exemption.

G. Clarify That the Proposal Does Not Apply to Products Sold to Health and 

Welfare Plans so that Participants in these Plans Can Have Continued Access 

to Employee Benefit Products Until the Consequences are Adequately 

Evaluated

It appears that “investment advice” could include a recommendation of a life, 

health, disability or other insurance policy to a plan fiduciary or participant. An insurance 

policy providing plan benefits might reasonably be characterized as “other property” within 

the meaning of the advice definition. In addition, a footnote to the proposed BIC Exemption 
32

states that such exemption may be used to exempt transactions involving health and welfare 

plans.26

Yet, the Department’s entire analysis and the focus of the proposed regulation and 

the exemptions is clearly the investment of plan assets and the marketing of investment 

products and services to retirement plans and IRAs. The Proposal fails to recognize that 

the distribution of insured health and welfare benefits is completely different than the 

distribution of insured products in the retirement market. A Guardian agent receives 

compensation in the form of a commission that is in no way connected to the claims paid 

out under the contract. The contracts are typically subject to annual renewal. In addition, 

an agent will often be involved in employee meetings where he or she explains the benefit 

of the coverage offered under a policy to employees after the employer selects the group 

contract and type of coverages to be offered. The Proposal is not at all clear regarding 

whether one or more of these activities are considered “investment advice” and, if so, how 

the BIC Exemption or PTE 84-24 as revised would apply to these activities. Furthermore, 

these products are in the nature of pure indemnity insurance. 

Before those persons marketing insurance policies to welfare plans are subjected to 

fiduciary standards and specifically the onerous conditions of the BIC Exemption, 

Guardian maintains that there is not sufficient evidence to support the extension of 

fiduciary standards to the sale of insurance products to welfare plans and participants. We 

note that the Department took the same position when it promulgated its final regulation 

under ERISA section 408(b)(2). In deciding to not immediately address the applicability 

of section 408(b)(2) to health and welfare plans, the Department stated “there are 

significant differences between service and compensation arrangements of welfare plans 

and those involving pension plans and that the Department should develop separate, more 

specifically tailored, disclosure requirements under ERISA section 408(b)(2) for welfare 

benefit plans.” Therefore, pending further analysis, we recommend that the Department 

exclude health and welfare benefit plans from the Proposal, preserving both the current 

rule and current prohibited transaction exemptions for sales in this market. 

IV. Other Necessary Changes to the Proposal

Set forth below are other critical areas which must be addressed by the Department in order 

to make the Proposal workable.

A. Extend Effective Date to Take into Account Reasonable Implementation 

Requirements

The requirements of the Proposal, even if modified as we suggest, will require a 

significant amount of time for Guardian to determine which of its activities will be 

“investment advice” and to write and implement compliance and operational procedures. 

In addition, we believe that the changes to our systems needed to meet the disclosure 

requirements of the BIC Exemption will take well more than one year to implement. 

Therefore, we do not believe that an effective date of 8 months after the final regulation is 

 

26 BIC Exemption, 80 Fed. Reg. 21960, 21966 n. 18 (Apr. 20, 2015).
33

published will be sufficient time for Guardian or any other large financial institution to

complete the necessary tasks. In order to accommodate the immense burden of operational 

compliance, we request an extension of the effective date to no sooner than 36–48 months

after the date the final regulation is published in the Federal Register. In addition, given 

the complexity of the Proposal, we believe the Department should specifically 

acknowledge that good faith efforts with reasonable diligence to comply with the terms 

and conditions of the final rule are sufficient to demonstrate compliance.

Guardian would like to emphasize that this is an extremely comprehensive and 

complicated rulemaking that will require a significant investment of financial and human 

capital over a period of years. We are concerned that the Department will rush to complete 

its rulemaking process. Guardian believes that this would be a mistake. Failure to make 

the requested changes to the Proposal and to provide Financial Institutions with adequate 

time to properly implement the final rule and regulations will likely lead to unbalanced 

results across industry segments and consumer confusion and require revisiting the rule 

and exemptions in the future, which will only further increase the costs involved. 

Therefore, we ask that the Department, after reviewing the written comments of Guardian 

and others and listening to the testimony at its hearings, repropose the rule and the 

exemptions to allow more time for the Department and industry participants to work 

together to create a rulemaking that protects the interests of investors, but in a measured 

way that will not cause significant upheaval in the retirement industry. 

B. Use Interpretive Bulletin 96-1 as the Basis for the Investment Education 

Carve-out to Preserve Existing Education Programs That Have Served Plans, 

Plan Participants and IRA Owners Well

Guardian supports the Department’s proposal to recognize that investment 

education is not, and should not, be treated as investment advice under ERISA, based on 

principles articulated in Interpretive Bulletin 96-1, 29 C.F.R. § 25.09.96-1 (“IB 96-1”). 

While not perfect, we believe that the framework reflected in IB 96-1 has led to greater 

access to educational information for countless individuals over the past two decades, 

thereby improving their chances of a financially secure retirement. 

However, the Proposal eliminates paragraphs (d)(3)(iii) and (4)(iv) of IB 96–1, 

which currently permit the use of asset allocation models that refer to specific investment 

products available under the plan or IRA as long as certain disclosure requirements are 

met. The Department, based upon its own experience and public comments, believes that 

asset allocation models populated with actual investment alternatives available under the 

plan or IRA “function as tailored, individualized investment recommendations, and can 

effectively steer recipients to particular investments, but without adequate protections 

against potential abuse.” 80 FR 21945.

We agree with the Department that this “represents a significant change”27 and, in 

response to the Department’s query, we do not believe that the change is “appropriate.” 

We believe it would have the effect of dramatically reducing the value of participant 

 

27 80 FR 21945.
34

education initiatives by making it exceedingly difficult, if not impossible, to impart the 

information needed by retirement plan participants to implement their investment 

decisions.

There are two less drastic ways of addressing the potential for abusive “steering” 

identified by the Department: 

 The perception of steering could be limited if the Department requires that if “a 

model asset allocation identifies or matches any specific investment alternative 

available under the plan with a generic asset class, then all investment 

alternatives under the plan with similar risk and return characteristics must be 

similarly identified or matched.” 61 FR 29586, 29587 (exposure draft). If this 

approach is adopted, the Department should be practical. For example, where 

the number of available investment alternatives within an asset class is so large 

that describing them all is likely to confuse, rather than enlighten, the education 

recipient, the Final Rule should permit asset allocation models to identify a 

representative subset of alternatives, as long as the subset is selected based on 

neutral factors and does not disproportionately identify alternatives which result 

in the most compensation being paid to the adviser or financial institution.

 Any potential for abuse on the part of the model provider would be eliminated 

if the IRA owner, plan sponsor or independent plan fiduciary were permitted to 

select the specific investment options included for each asset class in the 

portfolio. 

In addition, Guardian is concerned that the education carve-out is not clear 

regarding what information may be provided with regard to distributions and rollovers 

from a plan or IRA. There is also some language in the Proposal that we find problematic. 

The Proposal states “when providing general information, it cannot discuss distribution 

options under the plan or specific alternatives or services offered outside the plan,” but in 

that very same subsection, at paragraph (H), it can discuss “General methods and strategies 

for managing assets in retirement (e.g., systematic withdrawal payments, annuitization, 

guaranteed minimum withdrawal benefits), including those offered outside the plan or 

IRA.” We are unclear as to how the opening language to subsection (ii) relates to paragraph 

(H) thereunder. Similarly, subsection (iv) seems to allow a discussion of distribution 

options: “questionnaires, worksheets, software and similar materials which allow a plan 

fiduciary, participant or beneficiary, or IRA owners to evaluate distribution options”; 

however, paragraph (E) thereunder provides that the interactive material identify any 

distribution option. 

Our call center representatives are responsible for explaining all of the options 

available to a participant with regard to staying in the plan or taking a distribution,

including a rollover distribution. Unfortunately, due to the inconsistencies in the carve-out 

language, it is not entirely clear if our representatives can do this without losing the benefit 

of the carve-out. However, we think it is critical to be able to discuss all options without 

triggering fiduciary status. Without clarification, Guardian may be faced with providing 
35

less information to contractowners in order to avoid the risk that it inadvertently lose the

carve-out. It would be extremely challenging to apply the BIC Exemption in the context 

of a call center. 

 Therefore, the Proposal should be clarified to provide additional guidance 

as to when our call centers are providing distribution and rollover education 

rather than advice.

C. Clarify that Marketing of Services is Not Fiduciary

In addition to annuities, Guardian provides investment management and advisory 

services. It would appear that, under the Proposal, the marketing of these services could 

involve “investment advice” for a fee even though the Adviser receives no compensation 

for marketing the service but simply receives an “assets under management” fee if it is 

engaged. The Department should clarify that the marketing of “fee only” investment 

advice or management services will not be considered fiduciary advice so long as no 

compensation is received by any firm or individual in connection with the marketing or 

sale of the services. Thus, while the adviser or manager would receive fees for the 

provision of advisory or management services, it would not be considered a fiduciary 

adviser when marketing those services.

D. Exempt Certain Valuation of Securities and Other Property from the 

Fiduciary Definition to Allow for Valuation Required by Law or Regulation

Pursuant to the Proposal, Covered Advice also would include appraisals or similar 

statements, “whether verbal or written, concerning the value of securities or other property 

if provided in connection with a specific transaction or transactions involving the 

acquisition or disposition, or exchange, of such securities or other property by a plan or 

IRA.” This language is extremely broad and threatens to capture communications that 

reflect market values from market sources, even in the absence of a recommendation. For 

example, Guardian uses values from such market sources to calculate required minimum 

distributions and for similar purposes. 

 Therefore, the Department should clarify that the above-described uses of 

values of securities and other property are not covered by the definition.

E. Clarify the Broad Range of Investment Options Requirement so that 

Guardian and Its Agents Can Operate with Certainty

A condition of the BIC Exemption is that Guardian “offers for purchase, sale or 

holding, and the Adviser makes available to the Plan, participant or beneficiary account, or 

IRA for purchase, sale or holding, a range of Assets that is broad enough to enable the 

Adviser to make recommendations with respect to all of the asset classes reasonably 

necessary to serve the Best Interests of the Retirement Investor in light of its investment 

objectives, risk tolerance, and specific financial circumstances.” Alternatively, Guardian 

can certify that although it does not meet the “broad range of investment options” 
36

requirement, the investments and products that it makes available for its agents to sell to 

plans and IRAs allows the agents to act in accordance with the Impartial Conduct 

Standards.

Guardian is concerned about these requirements. The provision’s broad range 

requirement is unclear. It will be very difficult for Guardian and others to make a 

determination that its product offering is “broad enough” (emphasis added). As discussed, 

Guardian offers investments under its platforms that are intended to cover a broad number 

of asset classes to allow for diversification. However, we believe it unreasonable and 

unprecedented to make Guardian determine whether that is “enough.” 

 Guardian believes the “broad range” standard creates a vague and

unprecedented standard that presents too much compliance uncertainty and 

litigation risk. Additionally, the standard is unnecessary due to the 

requirement that the Adviser and Financial Institution act in the best interest 

of the Retirement Investor. Therefore, this requirement of the BIC 

Exemption should be eliminated. 

F. Coordinate with the SEC to Clarify that Registration of Registered 

Representatives as Investment Adviser Representatives is not Required for 

all Fiduciaries

Before the Proposal becomes effective, we request that the Department ask the SEC 

to confirm that registered representatives of Guardian’s broker-dealers who are deemed to 

be giving fiduciary advice under the Department’s expanded definition, and must 

acknowledge fiduciary status in the client contract required by the BIC Exemption, are not 

required to also register as investment adviser representatives under the Investment 

Advisers Act of 1940 (“Advisers Act”). Many registered representatives and their firms 

do not register as investment advisers under the Advisers Act because they do not provide 

investment advice as defined under the Advisers Act or are otherwise exempt from 

registration under the Advisers Act. We urge the Department to coordinate with the SEC 

to clarify that investment adviser representative registration will not be required solely due 

to the provisions of the Proposal. Without such clarification, the Proposal will ultimately 

result in additional costs for retirement consumers.

G. Delete the Data Retention Requirement to Protect Consumer Data Security

Lastly, Guardian urges the Department to remove the data retention provisions in 

Sections V(b) and (c) and Section IX of the BIC Exemption. The Department states that 

“the Department and certain other entities” need this information “to determine whether

the conditions of this exemption have been satisfied.” The data required by this provision 

is broad, encompassing six years of “Inflows,” “Outflows,” “Holdings,” and “Returns” by 

plans, participant and beneficiary accounts, and IRAs. This data would be calculated on a 
37

quarterly basis and by asset. To our knowledge, this type of data is not currently maintained 

by or not readily accessible to Financial Institutions. It would take a tremendous 

expenditure of time and resources to put the systems in place to track and maintain this 

data. Further, the Department and “other entities” have much of the information they need 

to determine whether the requirements of the exemption are met by reviewing the 

disclosures provided under ERISA section 408(b)(2) and other applicable exemptions. 

Finally, Guardian believes that much of the information required to be maintained pursuant 

to this requirement constitute trade secrets or proprietary business information, and most 

importantly, would put consumer data security at risk.

***

The changes in the retirement landscape have been quite dramatic over the past 40 

years. The shift away from defined benefit plans to participant-directed plans and IRAs 

has put the risk of investing squarely on the shoulders of individual investors who may or 

may not have the skills to undertake this responsibility. As a result, there is no doubt that 

the security of a comfortable retirement is jeopardized for millions of Americans.

We believe our company is uniquely positioned, along with other insurance 

companies, to provide lifetime income products to retirement investors who might 

otherwise be in danger of outliving their retirement income. Guardian, as a mutual 

company with a sales force of financial professionals who are well-trained and wellsupervised, is committed to continuing to provide products and services that are critical for 

small plans, participants and IRA owners now and in the future. We also operate our 

company in an effort to price our products appropriately and control our risks so that we 

can meet our future obligations to policyholders and contractowners regardless of market 

volatility, economic downturn or the interest rate environment.

As we have stated in this letter, Guardian generally supports the concept of a best 

interest standard for financial professionals who provide investment advice to retirement 

investors. Unfortunately, for the reasons cited above, we believe that the Proposal as 

drafted has many fundamental problems that do not support this goal of a best interest 

standard and would result in the unintended consequence of significantly limiting the 

products and services available to American workers, especially those in the working and 

middle classes, as well as small businesses. We urge the Department to proceed with 

caution before finalizing the Proposal to ensure that the unintended effect of this Proposal
38

will not be the disruption of the current framework that provides the lifetime guarantees 

that so many Americans rely on, and will need to continue to rely on, in the future. In 

short, we are concerned that the Proposal, without substantial changes, will make 

retirement less secure for these Americans by increasing costs, making it more challenging 

for providers and financial professionals to serve the retirement marketplace and reducing 

retirement savings.

Thank you for providing us with the opportunity to comment on the Department’s 

Proposal. If we can provide you with any further assistance in your consideration of these 

issues, please contact us.

Sincerely,

Tracy L. Rich